Erasmus University Rotterdam MSc in Maritime Economics and Logistics 2017/2018 Analysis of Natural Gas Supply Chain and Optimisation of Small-Scale Liquefied Natural Gas Supply Chain in Spain by Suhong Ahn copyright © Suhong Ahn Acknowledgements I appreciate Dr. Zuidwijk for valuable feedback for my thesis. Life is continuously unexpected and tough. However, I have managed it well so far with the support from my family. My mother always believes and supports me. Without my father, I would not be here since he introduced and helped me in the maritime industry. ii Abstract Spain has the most extensive infrastructure of small-scale LNG (SSLNG) in Europe. This leads to the complexity of the distribution of SSLNG to the domestic destinations. The purpose of the study is the optimisation of small-scale liquefied natural gas (SSLNG) supply chain by truckload transportation in Spanish territory in the Iberian Peninsula. Also, SSLNG in Spain cannot exist without large-scale LNG after trading the resource so, the whole markets are analysed. Seasonality of LNG causes a problem for truck companies transporting LNG since the companies should manage the surplus from the gap between peak and off-peak season. Another problem is a limit of LNG output truckload capacity at LNG receiving terminals. This leads for SSLNG facility to be supplied SSLNG not always from the nearest terminal. The last issue is derived from El Musel terminal under not operation by Spanish government even though a tremendous amount of capital was invested for the terminal. So, it is essential to justify the operation of the terminal to the Spanish government not to waste the investment. Mixed Integer Linear Programme (MILP) solves the network optimisation problems by using software “Excel Solver”. The scope of the study for simulations is from liquefied natural gas (LNG) import terminals to SSLNG facilities consisting of LNG fuel stations and satellite terminals. A regression model estimates a decision variable of SSLNG demand with seasonality for forecasting with using “Minitab” software. Three scenarios are applied to the model based on the degree of SSLNG demand with sub- scenario whether the operation of El Musel terminal or not. The seasonality has effects on the supply chain by appearing or disappearing short- term transportation of LNG. This has been observable in high demand (scenario 1). When the high demand almost reaches the maximum LNG truckload capacity of LNG terminals, the geographical reliance from the destinations to the terminal is weak. On the other hand, the less demand (scenario 2) results in the high geographical reliance. The difference in total costs comparing operation and no operation of El Musel is not substantial. A lack of capacity in scenario 3 is not able to analysis since adjustments of the order of terminals lead to different results while the other conditions are the same. Truck companies benefit from the number of trucks needed for LNG transportation calculated from the simulations since they can mitigate the adverse effects of the surplus of their asset in advance by setting appropriate strategy. There are three types of SSLNG facility depends on having a single or multiple LNG import terminals supplying SSLNG. The first and second types are not necessary to change the number of terminals since the numbers of terminal they needed remain same regardless of the scenario. On the other hand, the companies in the third type experiencing the change in the number of terminals between the two scenarios should consider making contracts to be supplied SSLNG. So, companies in the second type should be informed to meet the demands, otherwise satisfying the demand is impossible by losing the service terminals to other firms. iii Table of Contents Acknowledgements ............................................................................................................................................... ii Abstract ....................................................................................................................................................................... iii Table of Contents ................................................................................................................................................... iv List of tables ............................................................................................................................................................ vii List of figures ......................................................................................................................................................... viii List of Abbreviation ............................................................................................................................................... x Chapter 1 Introduction ......................................................................................................................................... 1 1.1 The topic .......................................................................................................................................................... 1 1.2. Problem Statement ................................................................................................................................... 1 1.3 Background and Justification ............................................................................................................. 2 1.4 Deficiencies in the Evidence ................................................................................................................ 2 1.5 Audience .......................................................................................................................................................... 2 1.6 Research Objective ................................................................................................................................... 2 1.7 Research Questions ................................................................................................................................. 2 1.8 Methodology and Research Design ......................................................................................... 3 1.9 Thesis Structure .......................................................................................................................................... 4 Chapter 2 Literature Review ............................................................................................................................. 5 2.1 Seasonality..................................................................................................................................................... 5 2.2 Vertical Integration .................................................................................................................................... 6 2.3 Optimisation of Small-Scale Supply Chain .................................................................................. 7 Chapter 3 Natural Gas and Liquefied Natural Gas Supply Chain in Spain ............................. 9 3.1 Trade of Natural Gas and Liquefied Natural Gas ...................................................................... 9 3.1.1 Import of Natural Gas and Liquefied Natural Gas ......................................................... 10 3.1.2 Export of Natural Gas and Liquefied Natural Gas ........................................................ 13 3.2 Domestic Consumption of Natural Gas and Liquefied Natural Gas ............................ 16 3.3 Large-Scale Infrastructure .................................................................................................................. 17 3.3.1 Liquefied Natural Gas Import Terminals ............................................................................ 18 3.3.2 Natural Gas Pipelines ................................................................................................................... 21 iv 3.3.3 Underground Storage Tanks of Natural Gas ................................................................... 22 3.4 Small-Scale Infrastructure .................................................................................................................. 23 3.4.1 Liquefied Natural Gas Satellite Terminal ........................................................................... 23 3.4.2 Liquefied Natural Gas Fuel Loading Road Station ....................................................... 25 3.4.3 Liquefied Natural Gas Fuel Loading Ship Station ........................................................ 27 3.4.4 Liquefied Natural Gas Bunker Ships .................................................................................... 28 3.4.5 Modes of Small-Scale Liquefied Natural Gas transportation ................................. 28 3.4.5.1 Trucks ................................................................................................................................................ 28 3.4.5.2 Ships .................................................................................................................................................. 29 3.5 Vertical Integration of Natural Gas and Liquefied Natural Gas Supply Chain in Spain ...................................................................................................................................................................... 30 3.6 Seasonality in the Natural Gas and Liquefied Natural Gas Supply Chain ............... 31 Chapter 4 Methodology and Data Collection .......................................................................................